(The Center Square) – Missouri’s first Motor Fuels Tax (MFT) increase since 1996 went into effect Friday with the state’s 17 cents gas tax going up by 2.5 cents a gallon.
During the 2021 legislative session, lawmakers adopted Senate Bill 262, which raises the MFT by 2.5 cents annually for five years, increasing it by 73% to 29.5 cents a gallon in 2026 to generate an additional $513 million for Missouri roads, according to the state’s Department of Revenue (DOR).
SB 262 – approved by the Senate 21-13 and House 104-52 after extensive debate – was carried by Senate President Pro Tem Sen. Dave Schatz, R-Sullivan, and was originally accompanied by a resolution to place the proposed MFT hike before voters in a referendum.
But after lawmakers in 2014 and 2018 proposed raising the MFT in referendums that voters shot down, SB 262’s referendum resolution was nixed by the introduction of what was billed as a “revenue-neutral” provision.
The provision, adopted from a 2017 South Carolina program, allows drivers to apply for refunds for anything they pay above 17 cents per gallon if they provide receipts.
Under the program, MFT taxpayers driving vehicles less than 26,000 pounds can fill out a form to be drafted by the DOR that logs the number of gallons purchased, the retailer where purchased and vehicle details. The form has not been published yet, so drivers must keep track of gas purchases on their own.
Drivers cannot submit refund applications until July 1, 2022. Annually afterward, the MFT-refund filing period will be July 1-Sept. 30. DOR has 45 days to process the applications.
According to SB 262’s fiscal analysis, Friday’s 2.5 cent increase will cost average Missouri drivers about an additional $1 a month. By 2026, the increase will cost average Missouri drivers approximately $60 annually.
The state is banking on relatively few Missourians claiming MFT refunds. Excluded are large trucks and out-of-state vehicles.
During the session, Schatz said South Carolina initially saw a 15% redemption rate and that SB 262 can absorb a 25% redemption rate to annually generate $513 million – $375 million for state highways and $138 million for local governments.
According to a December report by research nonprofit TRIP, Missouri ranks 45th nationwide in road funding and 52% of its 33,800 miles of roads are in “poor or mediocre condition,” costing drivers $8 billion annually in lost productivity and higher operating expenses.
Vigorous opposition to SB 262 slackened with the “revenue-neutral” provision. Sen. Bill Eigel, R-Weldon Spring, and other lawmakers still staunchly opposed the hike.
“Jefferson City has never had more money,” Eigel said when SB 262 was adopted. “Our balances have never been bigger in the state of Missouri. Our general fund balance is at a record level, our state budget is at a record level, our support from the federal government is at record levels. Any contention there’s a part of that government in Jefferson City that doesn’t have enough money seems woefully out-of-touch.”
Six House reps in a May 13 letter lobbied Gov. Mike Parson to veto SB 262 because the increased MFT would exceed 1% of total state revenues by 2026 and, therefore, under the state constitution, should go to voters in a referendum.
Also in May, Americans For Prosperity-Missouri (AFP) Director Jeremy Cady filed a referendum petition seeking to put the MFT hike before voters in November 2022. It failed to meet the 110,000 signature requirement within 90 days to get on the ballot.
